American Morning

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January 25th, 2010
12:30 PM ET

Was there enough stimulus money in the first place?

Editor's Note: All week, CNN examines the stimulus and looks at one of the greatest areas of concern for Americans: the economy. Tuesday on American Morning, we'll show you some of the good news from the stimulus money. One family says they have food on their table because of it.

By Lakshman Achuthan,
Managing Director, Economic Cycle Research Institute

[cnn-photo-caption image= caption="Lakshman Achuthan says it’s clear that the economy began to improve before the 2009 stimulus began to hit the economy."]

Question: Was there enough stimulus money in the first place?

Answer: To be clear, we’re talking about the $787 billion stimulus enacted in early 2009, not earlier efforts by the Fed to rescue the financial system in the fall of 2008, which certainly served to pull the economy back from the abyss.

That said, if we look at the objective data, it’s clear that the economy began to improve before the 2009 stimulus began to hit the economy. The major driver of the economic recovery remains the massive rebuilding of inventories, which was guaranteed once Armageddon was taken off the table in late 2008.

This is reminiscent of when FDR first took office in March 1933. That very month, before any of his policies took effect, the economy blasted off on a four-year expansion that boasted 10% average annual growth, slashing the jobless rate by 14 percentage points. Believe it or not, that recovery began nine months after President Hoover raised the top marginal tax rate from 25% to 63%.

All of this is to say that the power of the business cycle dwarfs virtually all short-term fiscal policy initiatives by politicians. Please also recall the first bipartisan stimulus package that sank without a trace in the spring of 2008, because the business cycle simply overwhelmed it, and the outcome would have been the same even if it had been twice the size. Likewise, for the second (2009) stimulus, size doesn’t really matter.

Bottom line, politicians will either take the credit or the blame for whatever happens, regardless of their efforts. In the same way, pundits will keep pushing their respective agendas regardless of the facts. To be fair, I too have an agenda which I strongly believe in - which is to highlight the importance of the business cycle.

Complete coverage: The Stimulus Project

Filed under: Economy • The Stimulus Project
soundoff (23 Responses)
  1. david jay

    If that stimulus fixed everything, why are we now seeing unemployment over 10% and rising and home foreclosures entering neighborhoods that weren't effected earlier. Things are bad and getting worse and no one seems to realize that improvement probably is some time away.

    February 4, 2010 at 2:00 pm |
  2. citizen

    Can you really tell any difference in a Democrat and a Republican? Other than their talking points they are all the same. You just need to follow the money.

    January 26, 2010 at 2:06 pm |
  3. CP

    Angeles, interesting points but not sure either party is necessarily more guilty than the other. What policies did Clinton, or now Obama, implement to reverse this disturbing trend.

    Moreover, whatever happened to companies that ran themselves in order to be "the best" and take a long term view of where they are going? Every big company now just goes quarter to quarter or at best year to year looking to increase stock prices by any means possible waiting for someone to buy them (or worse fighting off unsolicited takeovers like A-B went thru with InBev). What kind of system is that?

    But please leave the partisan comments out of the discussion - its a problem all around. In my humble opinion.

    January 26, 2010 at 1:32 pm |
  4. rrock

    The politicians use whatever excuse is handy to pass out the money/tax breaks. The goal is to get elected and not to worry about the future of the country. Thus the downturn was a great opportunity to hand out the cash.

    January 26, 2010 at 12:48 pm |
  5. Roman, Butler, Pa

    Thomas Duke; How can businesses hire, when banks keep pulling a billion dollars off the table that take direct aim at small businesses for seven straight months? They were in part responsible for this mess and yet they're not willing to lend. Small business is the economic engine of our country yet the banks keep pulling billions off the table. If it wasn't for the stimulus you be collecting food stamps along with millions of other people. So give it a rest!

    January 26, 2010 at 12:43 pm |
  6. Concerned Citizen

    Stimulas was / is a waste of time and money ........ designed by this administration to pay back political favors! Where are the jobs???
    The only ones created are government, state and local. Now Obama wants a spending freeze .......... after he already spent an absurdly amount of money ??? are you kidding me, this community organizer needs to find a community to organize and exit the White Houe a.s.a.p. before he does more harm.

    January 26, 2010 at 11:00 am |
  7. John

    Obama is selling our country to the Chinese. Are you OK with that? He is spending trillions of dollars on pork and borrowing all of it from China. The republicans and Tea party people are trying to stop the insane spending. Stop illegal immigration. Stop codling terrorists. Obama called the Christmas day bomber a Yemen Student and said he was not an Al Qaeda terrorist, never mind the facts of the case. Then he insists we give him constitutional rights even though he is not a citizen and is not entitled to our constitutional rights.

    January 26, 2010 at 10:48 am |
  8. James

    I have two comments.
    Mark Sanford doesn't need to be in politics. He doesn;t know that if it wasn't for ALL the people (rich and poor) he would be on welfare, because he is stupid.

    I think that if the Government would have taken this stimulus that some of it is being wasted, should have taken and give it to the tax payers that had filed taxes on $125,000 or less in 2008. I think this would have put more money in the enconomy instead of just a few peoples pocket.
    People would have maybe paid off some bills or even got out of debt, which I think would have put more money to put back in the economy.

    If you get this I would like if CNN would just do some figuring to see what they come up with.

    Thanks for doing a great job.

    January 26, 2010 at 10:40 am |
  9. cynthia britt

    I was so disappointed about the "puppet" coverage today. True, maybe the project doesn't fit the bill as well as I would like for stimulus money. However, the disdain that Kyra Phillips showed, I feel, was unprofessional. For years, that type of research has provided us with so much useful information to help explain our behaviors and, therefore, to be healthier people with healthier lives. I was appalled at her comment about "good parenting" and talking with your children, etc. What naivete. If explaining to your child and talking were enough to keep them from engaging in unhealthy behaviors, the world would indeed be a different place. Being a parent, she will, unfortunately, discover that for herself.
    I wish that humility in the face of our nation's problems and a good man's attempt to help lead us to a better path, will be part of CNN's new focus.

    January 26, 2010 at 10:10 am |
  10. SolarmanJD

    In march of 2009 The Gov of Ga was handed 244M dollars
    to do weatherization for the Ga people with income of less than 44K annually.
    They were supposed to get up to 6600.00 per household,
    to up grade windows, new AC systems, more insulation ect...

    Were is the money...I know not one family that received this Help
    in the entire State of Ga....

    I am a Electric Consumption Reduction Specialist and a Alternative Energy Production Guru.

    I tried every Office I could in this State of Ga to no avail...
    I had shovel ready Projects ready to go...

    But , no help from Perdue's Office...

    Were did the Money go?

    Confused in Ga

    January 26, 2010 at 9:53 am |
  11. Joseph Daniel Brian Lawlor

    Was the stimulus money too much or too little meaningless. A nation takes a heart shot and tries to pump blood(money) back into the body without discovering the problem.

    To Rob and Chad=climate do we tell the Peoples Miami, New York, Venice are all gone due to increasing tides, wave action and weather in general.What is going on globally is not really understood as it should be understood. are looking """hottttttt"'"this morning. You usually look good to begin with but this morning you seem a bit thing about you girls...always look good with the clothes on instead of clothes off...all you girls walking around without clothes is just titsand ass..with clothes we see so many variations beauty can wear.Married 28 years and do not fool around on my better half...appreciate beauty here Kiran and do not disrespect/gutter it. Love you living roses in the Garden of life itself.

    John..ship over Texas and reported to be over two miles long by CNN=small ship John..small ship...body of humanity the Primary Patient/Student with the bodies within used as physical examples towards the growth and development of that Primary. Those ships represent other developed Primaries who have already ironed out the probelms we currently face with our own development. The fix is for the global patient/student as a whole.Waiting for back up..look do we shut down all global wars and negative global actions ALL AT ONE TIME=look wait for it...

    Some of us understand how to put Government, Industry, Finance, Academic, Military, Media, Religion(spirituality+ethics) and the Peoples together properly while watching it being administered to improperly.Tic Toc Tic Toc Tic Talk.....

    Repulicans and Democrats represent the mindset of a nation and to be administered according to those mindsets but to have one mindset take a winer take all mentality over. DAYMA= IT MEANS ENOUGH AND COMES FROM THE INUIT LANGUAGE.

    Kiran..woof woof..good old dog here that loves to serve..Now CNN seen as holding back truths..CNN AND THE DELIVERY OF TRUTHS OUR MUSIC AT WORK..YOUR STILL OUT OF TUNE CNN. For the past twelves years some of us writing into CNN and at times not too pleased with the direction taken by CNN...serving self over the wellness and betterment of the whole...wise up...I know this will not make it to the for CNN to begin with. Always was to see if CNN was to keep the same tune...tune is changing...

    January 26, 2010 at 7:27 am |
  12. louis e. burt

    Stimulus hah! I am a small contractor in the Denver area. I bid a job that I was told that I would be used on and I had to fill a form out on how it would help put more men to work and how it would benefit my company.
    That was in june of 09 and I still haven't seen the money. Its mostly a scam on the american people to make them feel good.. Smoke and mirrors as usual. Only ones who benefit are the crooks who have worked for the government for years and have put out sub-standard quality of work. I'll bet you Haliburton has a bankroll of the stimulus in their back pocket.

    January 26, 2010 at 2:52 am |
  13. Rob

    PLEASE! Continue your expose of what's hapening to the stimulus money. NOBODY else seems to want to hold the system accountable. Dig, dig and keep on digging. Serious media is the ONLY way America can be protected from the "spin doctors".

    Real journalism for a change? Y'all get Bonus Points for taking this step!

    January 26, 2010 at 1:51 am |
  14. Emir Macari

    The Stimulus is working at CNN.... They have an entire team of people doing research on the Stimulus. Now that is what I call "creating jobs".

    January 25, 2010 at 11:23 pm |
  15. momforpeace

    Right now you don't know how much stimulus is enough.People are losing their jobs,homes, health care and where is all this stimulus going?

    January 25, 2010 at 11:03 pm |
  16. Kun

    We need more Enterpreneur and recruit more people. You may learn how to be Great Entrepreneur for free at sharpenbusiness dot com

    January 25, 2010 at 9:55 pm |
  17. indyboy

    Angeles, the only reason the founding fathers would be rolling in their graves is the incessant government interventionism that you surely propose. And no, the stimulus does not really help and the cost to the deficit is very high. That's what this article was about.

    January 25, 2010 at 7:40 pm |
  18. John Oaksmith

    At least it is something being done to help our country from the problems created by the Republican party and the George Bush Administration. Remember to December 1, 2009 a total of $1,05 Trillion Dollars has been spent on Iraq. Perhaps the Tea Party Republicans can remember the $Millions sent to Iraq DURING the war...Footballs of $100 bills.

    January 25, 2010 at 7:10 pm |
  19. Steve Sheets

    I realize most people did not receive 'cash in their pockets' from the stimulus package, but I also believe that alot of the people posting negative comments on here have failed to realize that the stimulus has helped them, indirectly, possibly 5, or more levels removed from their immediate situation. The fact that anyone that received extended unemployment benefits, did so as a direct result of the stimulus package. Without the stimulus, there would be no 'extended benefits' for anyone. This would have placed a heavier burden upon the financial, and housing sectors by forcing more to go bankrupt, losing their homes. In addition to helping those who were unemployed for an extended period of time, those benefit dollars were likely spent, paying bills, buying necessities for living, and trying to survive. Each of these purchases, helped to save jobs at the businesses where those products being purchased, were made. Those dollars worked their way through the economy several times, helping to save, or create jobs that would possibly have been lost, had it not been for the benefit dollars being extended by the stimulus plan. I am not sure that we can accurately count each, and every job that was either saved, or created directly by the stimulus plan. Yet I am sure that there were quite a few. Perhaps not the 2 or more million being talked about by both sides of the aisle. I am aware of 3 local projects within 2 miles of my location where stimulus dollars were used to do maintanance on a bridge, build a new water treatment facility, repair streets and water mains in the local town. I have no idea as to whether the people working on these projects would have lost their jobs without them, or if any of them were hired as a direct result of those businesses getting those jobs. The fact remains that without the stimulus dollars, those jobs would not have been completed then, nor how soon in the future. Personally, my wife, and I both lost our jobs, from different employers in January of 2009. We are both in our mid 50s. I have 24 years of CNC machining experience. She has over 29 years in manufacturing. I have received one response to 87 resumes' that I have sent out, or left with perspective employers. Without the extended benefits, we would have been forced to sell our home, and who knows where would be now. In that light, I have to say 'yes', the stimulus has at the very least, helped us, and the 3 million, or so others who have lost their jobs in the past 2 years.

    January 25, 2010 at 6:03 pm |
  20. kris

    "A higher cost forced on us by the Republican Party."....really??? It took Bush, Jr. 8 years to get the national deficit to where it was, and in less than a year in office, Obama has more than TRIPLED that number. Not only did he do this by giving companies with bad marketing and prices billions, but didn't make sure there was a way to track how they used it. So money that was supposed to go to creating jobs, instead goes to company execs' skiing gettaways and "Howey" getting a bigger bonus. This stimulus, so far, has only kept the greedy corperations limping on, and made China even more volatile against us.

    January 25, 2010 at 5:48 pm |
  21. karen hajek

    how dare that man say the consumer does not have the guts our jobs are gone to china you devalue our homes let the banks raise interest rates & insurance companies do what ever they want intill you are on main street and none of you are Wolfe said this is the land of plenty plenty for him let him live on main Street along with the rest of us, we who live on main street are mad & hopefuly when we will reach our limit we will be tired of taxes without representation also we put in these Democrats to do the job there so worried about getting relected there not working with Obama & the republicains are the party of no & trying to regain power there not even for helping with the problems just trying to make Obama look bad well I hope when these guys come up for relection they find out just how mad we are

    January 25, 2010 at 4:52 pm |
  22. Thomas Duke

    Too much! Businesses are NOT hiring as a result of the 'stimulus'...

    January 25, 2010 at 1:39 pm |
  23. Angeles

    At least the stimulus help reduce the recession.

    But there is a higher cost, one that future generations will be paying for.

    A Higher cost forced on us by the Republican Party.

    The Republican Supreme Court Justices voting to give our individual Civl Rights to major corporations.

    Most if not all major corporations are Foreign owned by Foreign corporations and Foreign Governments through investments, Bank Loans, Take overs, and mergers.

    And you Republicans and Tea party people are okay with this.

    Can you hear the Earth rumble with the Founding Fathers rolling in their graves?

    January 25, 2010 at 1:17 pm |